How to use the compound interest calculator
Enter the amount you are starting with, how much you will add every month, the annual interest rate or expected return, the number of years and how often interest compounds. Results update as you type: the ending balance, how much of it came from your own contributions, and how much is interest. The chart and the year-by-year table show the characteristic curve of compounding, where interest eventually outgrows the money you put in.
Contributions are added at the end of each month, and interest is applied monthly at the effective rate that matches the compounding frequency you choose. This is how savings accounts, CDs and bonds that pay a stated annual rate behave. For stocks and funds, treat the rate as an assumed average annual return.
The compound interest formula
Lump sum: FV = P × (1 + r/n)^(n × t) Monthly rate: i = (1 + r/n)^(n/12) − 1 Contributions: FV = PMT × [((1 + i)^(12t) − 1) ÷ i] Total: FV = P × (1 + i)^(12t) + PMT × [((1 + i)^(12t) − 1) ÷ i]
Why time matters more than anything
Compounding rewards patience. Someone who invests $500 a month from age 25 to 65 at 7% ends up with roughly $1.3 million, of which only $240,000 is their own money. Waiting ten years to start, and investing the same $500 a month from 35 to 65, produces roughly half as much. Try changing only the number of years in the calculator to see how much of the final balance is earned in the last decade.
Rate matters too. Over 30 years, the difference between a 5% and an 8% return more than doubles the ending balance from contributions alone. That is why investment costs such as an ETF's expense ratio deserve attention: a 1% annual fee is subtracted from your return every single year and compounds against you.
Limits of the projection
Real investment returns are not constant. Stocks can fall 20% or more in a single year, as the history of every bear market shows. A steady-rate projection is a planning tool, not a forecast. To see how dividends specifically contribute to growth, use the dividend calculator; to measure what an actual investment returned, use the stock return calculator.